Pay Attention: Data is the New Oil for Banking and Payments

Digital Transformation in Banking and Payments

Finextra recently interviewed Thomas Enger, the Secretary General of the European Banking Association. When talking about the industry trends surrounding instant payments, PSD2 and open banking he said “you will see that business models and value models will need to be redesigned” as banks move towards the digital economy.

The result of PSD2 regulation is that banks will have to let account holders leverage 3rd parties to provide additional value to the data that banks have held. The question for banks is whether they will adapt and use the data for new services, become platforms, or be just the trusted account holder of funds. This is why Enger said “Data is becoming the new oil” for payments and banking.

The wonderful thing about “data”compared to “oil” is that rather being a limited resource it is one that is growing by the petabytes each and every day.

Clayton Christensen’s Law of Conservation of Attractive Profits is a reminder to financial institutions. As the movement or money becomes commoditized with lower margins, there will be new opportunities emerging by creating services and products that leverage not just the banks’s data but combining it with external data. This will creates new value and should earn “attractive profits”. The questions is who will do this best, the banks or the FinTechs. MasterCard’s CEO understand this as they seek to enhance their data with AI.

If data is the oil that powers the digital economy, artificial intelligence is the refinery.
– Ajay Bhalla, CEO of MasterCard

New Business Models, New Entrants, New Connections

Open Banking is disrupting the financial services industry with not only new entrants and new business models being formed but it is also creating the need to connect to new partners. Traditional network connections can take weeks or even months to turn up which delays the time to realize revenue for new partners. Interconnection in Equinix can be done at “the speed of cloud”. This is why Equinix is a being used as a strategic platform for many financial institutions going through this digital transformation. They are leveraging Equinix as a meet-me place to connect to new FinTech partners that may reside in a variety of cloud service providers that are available on Equinix Cloud Exchange Fabric (ECX Fabric). Using software defined networks, new connections can be turned up in as quickly as 15 minutes.

Digital Transformation on Platform Equinix

Optimize Multi-Cloud Connectivity-This gives businesses the ability to evolve faster. Additional Equinix has launched a new product called SmartKey that is a Key Management Service that physically resides in Equinix, outside the public clouds where your data may be stored.

Enhance Cusotomer Experience – Some data loses its value quickly relative to time and with the movement to instant payments along with the integration of AI and behavioral analytics this will become more valuable “refining” of the oil.

Place Applications, Data and Services Closer to the Users – Businesses can place their data close to their users in the 52 markets where Equinix has a presence around the world. This is critically important with data sovereignty regulations becoming more common.

Ensure Data Is Secure And Compliant– .Last but not least, it is also critically important that data is secure. Equinix operates more PCI compliant facilities than any other co-location provider. Equinix is a trusted provider to “protect and connect” the digital assets of global financial services firms in the world’s top financial centers.

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Lance Homer

Lance Homer is the author of The Paymentologist where he blogs about news and trends to which the payment industry needs to "Pay Attention". He is the Global Head of Equinix's Digital Payments Ecosystem Strategy.